LTRO Effect Appears To Have Worn Off: The War For Spain

By John Mauldin: I fully intended to ignore Spain this week. Really, truly I did. I had my letter all planned, but then a few notes drew my attention, and the more I reflected on them, the more I realized that the inflection point that I thought the ECB had pushed down the road for at least a year with their recent €1 trillion LTRO is now rushing toward us much faster than ECB President Draghi had in mind when he launched his massive funding operation.So, we simply must pay attention to what Spain has done this week - which, to my surprise, seems to have escaped the attention of the major media. What we will find may be considered a tipping point when the crisis is analyzed by some future historian. And then we'll get back to some additional details on the US employment situation, starting with a few rather shocking dataComplete Story »

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AT LAST the waiting has ended. Over the past few weeks the markets have been obsessing over just how much liquidity banks would tap from the European Central Bank (ECB) in the second of its extraordinary three-year LTROs (long-term refinancing operations).

By Macro and Cheese:It has now been about four and a half months since ECB president Mario Draghi rolled out his supercharged version of LTRO--Long-Term Refinance Operations. The pair of ECB loan operations, one on December 21 of last year and one on February 29--was designed to boost the European banking system by lending more than EUR 1 trillion to at least 800 banks for a term of up to three years.

One year on from the "whatever it takes" speech and all appearances suggest Draghi's all-in move with the imaginary OMT 'worked. European sovereign spreads have compressed dramatically, European stock indices are near their highs, European financials are doing great.

ECB president Mario Draghi is in on the no-normalization act along with the Fed. Of course, a mere reduction in asset purchases by the Fed from $85 billion a month to $75 billion is not even a baby step towards normalization.
Anyway, it's liquidity full throttle in the Eurozone as well because Draghi Says ECB Will Offer More Long-Term Loans If Needed.

WASHINGTON — San Francisco billionaire Tom Steyer, a friend to Barack Obama and a major Democratic financier, is unveiling a social media campaign on Thursday that aims to rally the president’s formidable online army of supporters against the proposed Keystone XL pipeline.

Considering the fact that back in December Europe was facing major bank failures and a systemic financial crisis in very short order, the implementation of LTRO1 was a "game changing" event.At the same time, many financial commentators have tended to exaggerate the importance of LTRO, claiming that this facility essentially eliminates the prospects of a major economic and/or financial crisis in Europe.It is important to understand the benefits of LTRO as well as its limitations.
What LTRO Was And Is Able to Accomplish